Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

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southerndoc
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by southerndoc » Mon Aug 12, 2019 12:50 pm

Your situation seems to be increasing in complexity.

Before you do anything else, I highly advise you to seek counsel from retirement specialists, tax attorneys, and an accountant. I know you want to keep it simple and get answers here (trust me, I've been there), but you would be wise to get expert help.

abyan
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by abyan » Mon Aug 12, 2019 9:39 pm

southerndoc wrote:
Mon Aug 12, 2019 12:50 pm
Your situation seems to be increasing in complexity.

Before you do anything else, I highly advise you to seek counsel from retirement specialists, tax attorneys, and an accountant. I know you want to keep it simple and get answers here (trust me, I've been there), but you would be wise to get expert help.
I appreciate that. But this is an online discussion forum for people to come ask exactly these kind of questions, not just in the hopes of getting some answers and learning something ourselves, but also in the hopes of educating others who have the exact same questions we have, and/or who will have the exact same questions in the future, and will be able to look at these answers and learn from them. I appreciate that this is not always easy for many of us. But the only way we’re going to learn is by asking questions. So I do hope someone will be able to look a few post back and answer the questions I raised earlier today after talking to Schwab this morning.

And my accountant quite literally has disappeared off the face of the earth, going on three months now, or I would be asking her as well. :-)

PS I’m also not convinced it actually is that complicated. All I want to do is move my SOLO401(k) from one firm to another. And it appears that Schwab didn’t screw anything up, as we previously feared. I entered a few things wrong on one form, caught it talking to the Schwab guy this morning, and I’m going to start over again once I get a few answers about my EIN. These are questions that anyone doing a Backdoor Roth could have. Thus I think it’s useful to have them discussed here.

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southerndoc
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by southerndoc » Mon Aug 12, 2019 10:59 pm

abyan wrote:
Mon Aug 12, 2019 9:39 pm
southerndoc wrote:
Mon Aug 12, 2019 12:50 pm
Your situation seems to be increasing in complexity.

Before you do anything else, I highly advise you to seek counsel from retirement specialists, tax attorneys, and an accountant. I know you want to keep it simple and get answers here (trust me, I've been there), but you would be wise to get expert help.
I appreciate that. But this is an online discussion forum for people to come ask exactly these kind of questions, not just in the hopes of getting some answers and learning something ourselves, but also in the hopes of educating others who have the exact same questions we have, and/or who will have the exact same questions in the future, and will be able to look at these answers and learn from them. I appreciate that this is not always easy for many of us. But the only way we’re going to learn is by asking questions. So I do hope someone will be able to look a few post back and answer the questions I raised earlier today after talking to Schwab this morning.

And my accountant quite literally has disappeared off the face of the earth, going on three months now, or I would be asking her as well. :-)

PS I’m also not convinced it actually is that complicated. All I want to do is move my SOLO401(k) from one firm to another. And it appears that Schwab didn’t screw anything up, as we previously feared. I entered a few things wrong on one form, caught it talking to the Schwab guy this morning, and I’m going to start over again once I get a few answers about my EIN. These are questions that anyone doing a Backdoor Roth could have. Thus I think it’s useful to have them discussed here.
Generally speaking, it's not hard at all. You can only have one plan. That plan is housed at a broker (Schwab, Fidelity, etc.). You can amend the plan ("transfer" the plan if you will) from one broker to another, but you cannot open a new plan (a second plan).

You can rollover a SEP into a Solo 401(k) if your custodian/broker allows it. Vanguard does not, but Schwab and many others do. I opened a Solo 401(k) at Fidelity, rolled over my SEP from Vanguard to Fidelity, and then a few months later amended (transferred) my Solo 401(k) from Fidelity to Vanguard. Fidelity immediately closed the account as soon as it was liquidated for a trustee-to-trustee transfer. I never had two plans at the same time. (For 2 weeks, I had two accounts under the same plan during the transfer process, but the Fidelity account was inactive.)

abyan
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by abyan » Mon Aug 12, 2019 11:09 pm

Okay thanks. That’s what I hope to do too, as does the original poster I believe. I’m just trying to get an answer on whether I now get an EIN for my LLC to give Schwab, an EIN that’s different from the EIN I already have for the solo 401(k). Thanks again.

Spirit Rider
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by Spirit Rider » Mon Aug 12, 2019 11:54 pm

unclescrooge wrote:
Mon Aug 12, 2019 12:19 pm
And correct me if I'm wrong, but the 5500-ez just needs to be filed on time, and not necessarily filed correctly, if my goal is to avoid the penalties?
The is my understanding, but why would you want to cause increased IRS scrutiny by filing an incorrect Form 5500-EZ.

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unclescrooge
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by unclescrooge » Tue Aug 13, 2019 12:00 am

Spirit Rider wrote:
Mon Aug 12, 2019 11:54 pm
unclescrooge wrote:
Mon Aug 12, 2019 12:19 pm
And correct me if I'm wrong, but the 5500-ez just needs to be filed on time, and not necessarily filed correctly, if my goal is to avoid the penalties?
The is my understanding, but why would you want to cause increased IRS scrutiny by filing an incorrect Form 5500-EZ.
Not deliberately trying to mess it up.
But the question did come up when my cousin asked me to help him fill it out recently. We went over it and weren't 100% sure on some questions. I told him it was more important to get it filed on time, than perfectly correct.

Spirit Rider
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by Spirit Rider » Tue Aug 13, 2019 12:06 am

abyan wrote:
Mon Aug 12, 2019 11:09 pm
Okay thanks. That’s what I hope to do too, as does the original poster I believe. I’m just trying to get an answer on whether I now get an EIN for my LLC to give Schwab, an EIN that’s different from the EIN I already have for the solo 401(k). Thanks again.
I have never been able to get a clear answer on the EIN issue. Personally, I have used the EIN of the business for more than a decade, but I know many people who have an EIN just for the plan. I have seen conflicting information from the IRS and never heard of the IRS having a problem with either. I think this is a case where you have to follow the provider's lead.

Spirit Rider
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by Spirit Rider » Tue Aug 13, 2019 12:08 am

unclescrooge wrote:
Tue Aug 13, 2019 12:00 am
Spirit Rider wrote:
Mon Aug 12, 2019 11:54 pm
unclescrooge wrote:
Mon Aug 12, 2019 12:19 pm
And correct me if I'm wrong, but the 5500-ez just needs to be filed on time, and not necessarily filed correctly, if my goal is to avoid the penalties?
The is my understanding, but why would you want to cause increased IRS scrutiny by filing an incorrect Form 5500-EZ.
Not deliberately trying to mess it up.
But the question did come up when my cousin asked me to help him fill it out recently. We went over it and weren't 100% sure on some questions. I told him it was more important to get it filed on time, than perfectly correct.
That was good advice as a late filing would cost them a minimum of $500.

abyan
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by abyan » Tue Aug 13, 2019 9:33 am

Thanks everyone. This was all supremely helpful. I went and got the EIN for my business, as even the IRS guy said don't worry about it, it's not a big deal getting an EIN, and for IRS purposes, since I'm a single member LLC, they know the EIN is me just like my social security number is me, so I shouldn't get too worried about it. He said if I want, but not required, just put both SS and EIN on my Schedule C if I want to make it a little easier for the IRS. (He was surprisingly not concerned.)

So I will contact Schwab again, pay extra attention to the forms this time, and hopefully get this baby moving.

One last question to confirm what I've already been told about the backdoor roth: If I max out my Solo401k this year with a $62k contribution (because I'm over 50), I can still contribute $7k in non-deductible contributions to a traditional IRA. And that isn't breaking some ceiling/limit as to how much I can put away (even though it's non-deductible).

Thanks again everyone.

HomeStretch
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by HomeStretch » Tue Aug 13, 2019 10:04 am

abyan wrote:
Tue Aug 13, 2019 9:33 am
One last question to confirm what I've already been told about the backdoor roth: If I max out my Solo401k this year with a $62k contribution (because I'm over 50), I can still contribute $7k in non-deductible contributions to a traditional IRA. And that isn't breaking some ceiling/limit as to how much I can put away (even though it's non-deductible).
Yes, you can contribute $7k to a tIRA in addition to $62k to your Solo 401k (assuming you have at least $69k in eligible compensation and you aren’t contributing to any other retirement plans).
Last edited by HomeStretch on Tue Aug 13, 2019 10:05 am, edited 1 time in total.

abyan
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by abyan » Tue Aug 13, 2019 10:05 am

HomeStretch wrote:
Tue Aug 13, 2019 10:04 am

Yes, you can contribute $7k to a tIRA in addition to $62k to your Solo 401k (assuming you have at least $69k in eligible compensation).
Still blows my mind. I get why people get so excited about the backdoor roth. :)

Spirit Rider
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by Spirit Rider » Tue Aug 13, 2019 10:12 am

To answer your last question first. Yes, you can max out both the 401k and Backdoor Roth if you have sufficient self-employed earned income for the one-participant 401k and remaining compensation for the Backdoor Roth.

One point on the on the adoption agreement. I suggest you elect maximum employee eligibility restrictions. These restrictions are >= age 21 and one year of service >=1,000 hours. While you may not have any plans to hire employees.

This allows you to hire employees < age 21 and/or part-time (< 1,000 hours /year) including your children without having to terminate the plan. Be careful to elect the restrictions for future not current employees. Otherwise, you would not be eligible to make contributions.

abyan
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Re: Which Brokerage for solo 401k (to roll IRA into) pre Backdoor Roth

Post by abyan » Tue Aug 13, 2019 10:21 am

Spirit Rider wrote:
Tue Aug 13, 2019 10:12 am
To answer your last question first. Yes, you can max out both the 401k and Backdoor Roth if you have sufficient self-employed earned income for the one-participant 401k and remaining compensation for the Backdoor Roth.

One point on the on the adoption agreement. I suggest you elect maximum employee eligibility restrictions. These restrictions are >= age 21 and one year of service >=1,000 hours. While you may not have any plans to hire employees.

This allows you to hire employees < age 21 and/or part-time (< 1,000 hours /year) including your children without having to terminate the plan. Be careful to elect the restrictions for future not current employees. Otherwise, you would not be eligible to make contributions.
Yes, sufficient income. And that's interesting, and smart, about the employees. I have none. Nor do I have kids.

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